TaxTMI 
TaxTMI 
2024 (8) TMI 135
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....by Authority for Advance Ruling, Andhra Pradesh. 1. Background of the Case: • The applicant, M/s. Zuari Farmhub Limited is engaged in manufacturing trading and marketing of chemical Fertilisers, water soluble Fertilisers, seeds, pesticides and supply of allied services, all used in agriculture. • The process procures various raw materials generally known as micronutrients, such as Zinc, Manganese, Ferrous and so on, by way of imports or domestic purchases and prepares a mixture, to make it a micronutrient Fertiliser, by way of blending, as approved by Ministry of Agriculture of the particular State. It is understood that the mixture varies based on the soil culture. Currently, the Applicant is in the process of manufacturing two different sets of products, the composition of which is detailed in tabular format herein below: Product 1: Mangala Borosan Composition Product 2: MangalaGl Composition Items: Items: Zinc Sulphate Monohydrate (ZnSO4.H2O) 32.50% Zinc Sulphate Monohydrate(ZnSO 4.H2O) 17.00% Iron (II) sulphate (FeSO4) 28.00% Iron (II) sulphate (FeSO4) 13.00% Manganese (II) sulphate (MnSO4) 08.00% M....
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....ulphur) and Micronutrients (Zinc, Manganese, Copper, Iron, Boron and Molybdenum) (ii) "Mixture of Micronutrients" is defined in Section 2(mb) of the FCO, 1985 as a mixture which are made by mixing of micronutrients notified in Schedule-I under sub-heading "Ig MICRONUTRIENTS" of said Order. (iii) "Mixture of Fertiliser" is defined in Section 2(n) of the FCO, 1985 as a mixture of Fertilisers made by physical mixing of two or more fertilisers with or without inert material in physical or granular form and includes a mixture of NPK fertilisers, a mixture of micronutrient fertilisers and a mixture of NPK with micronutrient fertilisers; • In this backdrop, Appellant would like to mention that the products of the Appellant are covered under the Andhra Pradesh state government notification approving the standards of various grades of manufacturing the mixtures of micronutrients to be used as fertilisers. Concurrent reading of both definition and state notification establishes that products supplied by the Appellant are nothing but Fertilisers as per FCO, 1985 B. Most appropriate classification of the Fertilisers will be under chapter 31 of the First Schedu....
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....micronutrients to the plant system. • Therefore, though not directly, in the mixture of chemicals (micronutrients), one of the trace elements, viz., Nitrogen is most certainly produced/emanates therein, when put to use, thus clearly making it Fertilizer for the purposes of classification under HSN 3105 9090 - as referred in Note 6 to Chapter 31 of the Customs Tariff Act, 1975. Therefore, the same would be most appropriately classifiable under HSN 3105 9090. • Further, the said fact has been accepted by various tribunal decisions, which confirms that micronutrients used as Fertilisers are classifiable under Chapter 31 and in specific 3105 9090. Details of ruling along with relevant extracts is provided below for immediate reference:- (a) In the case of CIBA India Ltd. Versus Commissioner of Customs, Chennai - 2009 (237) E.L.T. 207 (Tri. -Chennai); (b) Commissioner of Customs, Chennai Versus SLV Fertichem - 2018 (363) E.L.T 847 (Tri. -Chennai). C. Resorting to classification under Chapter 38 which provides for classification of miscellaneous chemical products, and includes preparations of chemical industry or allied industries, would be ....
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....phates which qualifies as Micronutrients are Copper Sulphate, Zinc Sulphate, Manganese Sulphate and Ferrous Sulphate. Therefore, it can be said that among all inorganic chemicals that are covered under Chapters 28/38, only a few of such chemicals are specifically considered as Micronutrients and are made part of FCO, 1985. • At this juncture, it is relevant to note that, though LAAR has held that the product is a blend of inorganic chemicals but failed to appreciate the fact that, it is a blend of such inorganic chemicals, which are specifically included in FCO, 1985 as micronutrients and hence more they cannot be merely said to be mixture of inorganic chemicals and classify under HSN 2833 29 90. Here, LAAR has failed to appreciate the inclusion of set of micronutrients in FCO, 1985 which are to be used as fertilizers only and nothing else. E. Product being a fertilizer should attract GST at the rate of 5% under HSN 3105 90 90. However, without prejudice to the said submissions, even if the product is to be considered as mixture of micronutrient as per FCO order, then rate of GST should be 12% under Chapter 38. • Basis the reading of the above facts and....
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.... of the facts and the grounds in this regard, the proposed product to be manufactured by the appellant is rightly classifiable under 3105 9090 and gets covered under Entry 182D of Schedule I to the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 read with relevant State Rate Notification and taxable at 5%. However, the only alternate classification would be under Chapter 38 as micronutrients prescribed in FCO, 1985 i.e., 3824 99 00, which is taxable under Entry 56 of Schedule II to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and would therefore attract rate of GST at 12%. SI.No Chapter / Heading / Subheading / Tariff Item Description of Entry Schedule and Rate of GST 182D 3105 Mineral or chemical fertilisers containing two or three of the fertilising elements nitrogen, phosphorus and potassium; other fertilisers; goods of this Chapter in tablets or similar forms or in packages of a gross weight not exceeding 10 kg; other than those which are clearly not to be used as Fertilisers Schedule I - 5% (CGST - 2.5% and SGST - 2.5% or IGST - 5%) 45 3105 Mineral or chemical fertilisers containing two or three of the fert....
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....priate classification of the said micronutrient Fertilisers ? Answer: 2833 29 90 (Under Schedule III - 18% (CGST-9% and SGST-9% or IGST-18%). 3. The Appellant had submitted technical literature along with Certificate of Confirmation given by MCFL and contended that the product "Mangala Borosan" / "Mangala Gl" under classification is in the nature of a Fertilizer falling under Chapter Heading 3105 90 90and urged the AAAR to uphold their contention. As per the Certificate of Confirmation given by MCFL .where in it was stated that, Mangalore Chemicals & Fertilizers Limited, Mangaluru have been approached by Zuari Farm Hub Limited, having its registered office at No.74, Prestige Feroze, 3rd Floor , Cunningham Road, Vasant Nagar, Bengaluru - 560 052, Karnataka., to analyse the composition of the products referred in, meant to be used as fertilisers and confirm whether the said product comprises or it is made up of "Micronutrients" or " Mixture of Micronutrients". MCFL performed analysis and confirm that the composition of the products is as tabulated below: SI.No Parameter Mangala Borosan Mangala G1 Specification Result Specific....
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.... Magnesium sulphate (MgSO4) 10.00% Copper Sulphate (CUSO4) 02.50% Total 100.00% 100.00% We have further seen the submissions made by the Appellant. It is pertinent to mention that as per "Explanation" under Notification No.1/2017-CT(Rate), reference to Tariff, Heading, sub-Heading, Chapter shall refer to the First Schedule of the Customs Tariff Act, 1975. It further goes on to add that the Rules of Interpretation as per the Customs Tariff Act, the Section Notes and the Chapter Notes shall apply for interpretation of the said Notification. The relevant provision of the Explanation under Notification No. 1/2017-CT(Rate) is reproduced hereunder for ready reference: Explanation. - For the purposes of this notification, - (iii) "Tariff item", "sub-heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explan....
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....tilising elements nitrogen, phosphorus and potassium; other fertilisers: goods of this Chapter in tablets or similar forms or in packages of a gross weight not exceeding 10 kg; other than those which are clearly not to be used as fertilizers"; 3105 Mineral or chemical fertilisers containing two or three of the fertilising elements nitrogen, phosphorus and potassium; other fertilisers: goods of this Chapter in tablets or similar forms or in packages of a gross weight not exceeding 10 kg, which are clearly not to be used as fertilizers 6. The appellant is aware that their product does not contain the essential constituents of Nitrogen, Phosphorous or Potassium as stipulated by the Chapter Notes cited above. This is also evidenced by the constituents furnished by the Appellant and which was reproduced above. While the Appellant is claiming the same to be Fertilisers, yet for the purpose of taxation, the relevant Entry in the Tariff determines the Tax rate. As seen from the Customs Tariff as well as the GST Rate Notification, the description for Other Fertilisers is clearly mentioned and there is a pre-requisite that such products must contain one or more of the fertilizing el....
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....e plants either directly or by biological process or by both in the soil or plant as notified from time to time by Central Government and specified in the schedules appended to this order or as may be notified by the State Governments, and includes a biostimulant and nanofertiliser. Explanation:- For the purpose of Fertiliser, - (i) "the essential plant nutrients" include Primary Nutrients (Nitrogen, Phosphorous and Potassium). Secondary Nutrients (Calcium Magnesium and Sulphur) and Micronutrients (Zinc, Manganese, Copper, Iron, Boron and Molybdenum); (ii) "Beneficial element" means any element as notified by the Central Government from time to time. 'Mixture of Micronutrient" is defined in section 2(mb) of the FCO, 1985 as a mixture which are made by mixing of micronutrients notified in Schedule I under the sub-heading "1(g) MICRONUTRIENTS" of said Order. "Mixture of Fertiliser" is defined in Section 2(n) of the FCO,1985 as a mixture of fertilisers made by physical mixing two or more fertilisers with or without inert material in physical or granular form and includes a mixture of NPK fertilisers, a mixture of micronutrient fertilise....